Wednesday, October 12, 2016

China's Protected Farming Regions and Modern Ag Funds

China is trying out "new" approaches to supporting farmers that funnel money into "protected" traditional farming regions and establish government-bank partnership funds to support agribusinesses.

The conceptual framework is laid out in an article, "Reasons for Our Country's Increase in Grain Imports and Countermeasures," by a China Ministry of Agriculture task force published last year (and posted on the Ministry's web site this month). The article frets about the explosion of "grain" imports (which includes soybeans) and calls for a big boost in subsidies that are shoehorned into the rules on support imposed by World Trade Organization (WTO) rules. The authors call for ramping up "green box" spending on agriculture which is not limited by WTO rules.

China's Ministry of Agriculture is establishing "protection regions" for selected crops based on the "geographic indicators" approach used in the European Union. The Ministry identifies "functional" areas that are important grain production regions and targets them for spending on farming infrastructure, mechanization, "green" and "organic" certifications, processing industry development and brand-building based on special features of the local commodity.

Keshan County--a soybean-producing area in Heilongjiang Province's Qiqihar region--was designated as the first pilot "soybean production protection region" in May 2016. It was already a national rural reform experimental region and a national modern agriculture model county. The county was chosen based on its long history of producing high-protein soybeans, large-scale production, high level of mechanization, the role of science and technology, and its certification by the Ministry's Green Food Development Center as an "A-grade" "green food" producer. Keshan County soybeans are designated as a national "geographic indicator product." Keshan was also designated this year as one of the first twenty-eight "model counties for mechanizing the entire production process."

Government money will pour into the county for investment in "high standard fields" with irrigation canals and roads, "green" production, soil fertility testing and improvement, machinery purchase subsidies, and "various types of grain and oilseed subsidies and aid." The project is also supporting a county soybean processing and e-commerce company. "Internet of things" apparatus will be installed in the "high standard fields".

A Science News article last month gave more details on the protection region pilot, explaining that the county features an "indigenously bred" "Guangshi No. 1 Red" soybean variety with a distinctive red color and high protein bred by the county branch of the provincial agricultural research academy. The variety has been labeled as non-GMO, and careful measures will be taken to "prevent a single GMO seed from entering the county." County officials explained that Keshan has a unique climate and natural advantage, a balanced ecology, fertile soil, and underground spring water that yield "good" soybeans with healthy, balanced nutrient content.

Local officials interviewed by Science News were disdainful of the target price subsidy pilot implemented for soybean producers in the northeastern provinces. Criticizing the subsidy's late arrival, one local official said the target price subsidies "really suck." While local farmers refer to soybeans as the "iron crop," they have fallen from a peak of 86% of the county's farmland in 2008-09 to an estimated 40% this year. Most farmers have shifted land into corn, a more profitable crop.

A second measure, "Modern Agriculture Development Funds," aims to support local agribusinesses that are starved of credit. The MOA article recommended that financial institutions should be given a quota of loans to make for agriculture to address the shortfall of investment. The first pilot "Modern Agriculture Development Fund" was announced in Henan Province where 14 enterprises signed investment agreements. The Henan fund's initial amount of 420 million yuan is financed by 140 million yuan from the provincial finance department and 280 million yuan from the Henan-based "Central Plains Bank" (中原银行). The government's funds will be managed by the Henan Province Comprehensive Development Company through a purportedly "marketized" process. The 14 companies are "dragon head enterprises" that do not have stock market listings. They will receive 400 million yuan from the fund to support participation in 378 projects selected by the province's finance and animal husbandry departments.

This month, Jiangsu Province announced its 400-million-yuan Modern Agriculture Development Fund and is accepting applications. Other provinces and cities appear to be announcing such funds as well.

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